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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 COMMISSION FILE NO.: 1-7182-06
 MERRILL LYNCH PREFERRED CAPITAL TRUST III
  Delaware
    
    13-7139561(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)4 World Financial CenterNew York, New York
    
    10080(Address of principal executive offices)
    
    (Zip Code)
  COMMISSION FILE NO.: 1-7182-05
 MERRILL LYNCH PREFERRED FUNDING III, L.P.
  Delaware
    
    13-3982448(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)4 World Financial CenterNew York, New York
    
    10080(Address of principal executive offices)
    
    (Zip Code)
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 Yes o No þ




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS (Unaudited)CONDENSED BALANCE SHEETS (unaudited)CONDENSED STATEMENTS OF EARNINGS (unaudited)CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (unaudited)CONDENSED STATEMENTS OF CASH FLOWS (unaudited)NOTE TO CONDENSED FINANCIAL STATEMENTS (unaudited)CONDENSED BALANCE SHEETS (unaudited)CONDENSED STATEMENTS OF EARNINGS (unaudited)CONDENSED STATEMENTS OF CHANGES IN PARTNERS CAPITAL (unaudited)CONDENSED STATEMENTS OF CASH FLOWS (unaudited)NOTE TO CONDENSED FINANCIAL STATEMENTS (unaudited)ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONItem 1A. Risk FactorsITEM 6. EXHIBITSSIGNATURESINDEX TO EXHIBITSExhibit 12Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2Exhibit 99.1    Table of Contents  
 
  
 
   
 
 
 June 30, 2010
    
    
    December 31, 2009ASSETSInvestment in affiliate partnership preferred securities
    
    $
    773,196
    
    
    $
    773,196Total Assets
    
    $
    773,196
    
    
    $
    773,196STOCKHOLDERS EQUITYPreferred securities (7% Trust Originated Preferred
Securities; 30,000,000 authorized, issued, and
outstanding; $25 liquidation amount per security)
    
    $
    750,000
    
    
    $
    750,000Common securities (7% Trust Common Securities;
927,840 authorized, issued, and outstanding;
$25 liquidation amount per security)
    
    
    23,196
    
    
    
    23,196Total Stockholders Equity
    
    $
    773,196
    
    
    $
    773,196See Note to Condensed Financial Statements
  2




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FOR THE THREE MONTHS ENDEDJune 30, 2010
    
    
    June 30, 2009EARNINGSInterest on affiliate partnership preferred securities
    
    $
    13,531
    
    
    $
    13,531FOR THE SIX MONTHS ENDEDJune 30, 2010
    
    
    June 30, 2009EARNINGSInterest on affiliate partnership preferred securities
    
    $
    27,062
    
    
    $
    27,062
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FOR THE SIX MONTHS ENDEDJune 30, 2010
    
    
    June 30, 2009PREFERRED SECURITIESBalance, beginning and end of period
    
    $
    750,000
    
    
    $
    750,000COMMON SECURITIESBalance, beginning and end of period
    
    
    23,196
    
    
    
    23,196UNDISTRIBUTED EARNINGSBalance, beginning of period
    
    
    
    
    
    
    Earnings
    
    
    27,062
    
    
    
    27,062Distributions
    
    
    (27,062
    )
    
    
    (27,062
    )Balance, end of period
    
    
    
    
    
    
    Total Stockholders Equity
    
    $
    773,196
    
    
    $
    773,196
   4




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FOR THE SIX MONTHS ENDEDJune 30, 2010
    
    
    June 30, 2009CASH FLOWS FROM OPERATING ACTIVITIES:Earnings
    
    $
    27,062
    
    
    $
    27,062Cash provided by operating activities
    
    
    27,062
    
    
    
    27,062CASH FLOWS FROM FINANCING ACTIVITIES:Distributions
    
    
    (27,062
    )
    
    
    (27,062
    )Cash used for financing activities
    
    
    (27,062
    )
    
    
    (27,062
    )NET CHANGE IN CASH
    
    
    
    
    
    
    CASH, BEGINNING OF PERIOD
    
    
    
    
    
    
    CASH, END OF PERIOD
    
    $
    
    
    
    $
    
   5




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6




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June 30, 2010
    
    
    December 31, 2009ASSETSInvestments:Affiliate debentures
    
    $
    900,547
    
    
    $
    900,547U.S. Government and agencies
    
    
    9,101
    
    
    
    9,105Total investments
    
    
    909,648
    
    
    
    909,652Total Assets
    
    $
    909,648
    
    
    $
    909,652PARTNERS CAPITALLimited partnership interest
    
    $
    773,196
    
    
    $
    773,196General partnership interest
    
    
    136,452
    
    
    
    136,456Total Partners Capital
    
    $
    909,648
    
    
    $
    909,652
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FOR THE THREE MONTHS ENDEDJune 30, 2010
    
    
    June 30, 2009EARNINGSInterest income:Affiliate debentures
    
    $
    15,759
    
    
    $
    15,759U.S. Government and agencies
    
    
    4
    
    
    
    8Earnings
    
    $
    15,763
    
    
    $
    15,767FOR THE SIX MONTHS ENDEDJune 30, 2010
    
    
    June 30, 2009EARNINGSInterest income:Affiliate debentures
    
    $
    31,519
    
    
    $
    31,519U.S. Government and
agencies
    
    
    9
    
    
    
    19Earnings
    
    $
    31,528
    
    
    $
    31,538
   8




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FOR THE SIX MONTHS ENDEDJune 30, 2010
    
    
    June 30, 2009LIMITED PARTNERS CAPITALBalance, beginning of period
    
    $
    773,196
    
    
    $
    773,196Net income allocated to limited
partner
    
    
    27,062
    
    
    
    27,062Distributions
    
    
    (27,062
    )
    
    
    (27,062
    )Balance, end of period
    
    
    773,196
    
    
    
    773,196GENERAL PARTNERS CAPITALBalance, beginning of period
    
    
    136,456
    
    
    
    136,452Net income allocated to general partner
    
    
    4,466
    
    
    
    4,476Distributions
    
    
    (4,470
    )
    
    
    (4,479
    )Balance, end of period
    
    
    136,452
    
    
    
    136,449TOTAL PARTNERS CAPITAL
    
    $
    909,648
    
    
    $
    909,645
   9




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FOR THE SIX MONTHS ENDEDJune 30, 2010
    
    
    June 30, 2009CASH FLOWS FROM OPERATING ACTIVITIES:Earnings
    
    $
    31,528
    
    
    $
    31,538Accretion of interest on securities issued by U.S. Government and agencies
    
    
    (9
    )
    
    
    (19
    )Cash provided by operating activities
    
    
    31,519
    
    
    
    31,519CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of investment securities
    
    
    (9,095
    )
    
    
    (9,096
    )Maturities of investment securities
    
    
    9,108
    
    
    
    9,118Cash provided by investing activities
    
    
    13
    
    
    
    22CASH FLOWS FROM FINANCING ACTIVITIES:Distributions to limited partner
    
    
    (27,062
    )
    
    
    (27,062
    )Distributions to general partner
    
    
    (4,470
    )
    
    
    (4,479
    )Cash used for financing activities
    
    
    (31,532
    )
    
    
    (31,541
    )NET CHANGE IN CASH
    
    
    
    
    
    
    CASH, BEGINNING OF PERIOD
    
    
    
    
    
    
    CASH, END OF PERIOD
    
    $
    
    
    
    $
    
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12




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12
    
    
    Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Securities Distributions.31.1
    
    
    Rule 13a  14(a) Certification.31.2
    
    
    Rule 13a  14(a) Certification.32.1
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1
    
    
    Excerpt of Merrill Lynch & Co., Inc. Quarterly Report on Form 10-Q for the period ended June 30, 2010.
  13




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MERRILL LYNCH PREFERRED CAPITAL TRUST III*By:
    /s/ MARLENE DEBELName:
    Marlene DebelTitle:
    Regular TrusteeMERRILL LYNCH PREFERRED FUNDING III, L.P.*By:
    MERRILL LYNCH & CO., INC., as General PartnerBy:
    /s/ THOMAS W. PERRYName:
    Thomas W. PerryTitle:
    Chief Accounting Officer and Controller

Merrill Lynch & Co., Inc.  
 *
    
    There is no principal executive officer(s), principal financial officer,
controller, principal accounting officer or board of directors of the
Registrants. The Trustees of the Trust (which include the Regular Trustees, the
Property Trustee and the Delaware Trustee) together exercise all powers and
perform all functions with respect to the Trust.  14




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EXHIBITS12*
    
    
    Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Securities Distributions.31.1*
    
    
    Rule 13a  14(a) Certification.31.2*
    
    
    Rule 13a  14(a) Certification.32.1*
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1*
    
    
    Excerpt of Merrill Lynch & Co., Inc. Quarterly Report on Form 10-Q for the period ended June 30, 2010.
 
 *
    
    Included herewith  15